Terrible 2's at 1.

I've had a few things I've wanted to blog about lately but we are in the process of moving so my time is very limited, at least until next week.
Something I really wanted to post about was discipline. Every parent has a different method.
I consider myself pretty easy going when it comes down to how I discipline Nikolas. I have a strict, no hitting, no yelling policy because I feel like when children get spanked or yelled at it makes them insecure, and for the most part they don't really understand why you, the parent, is hurting them physically or emotionally. Especially not this young.
I know plenty of people who completely disagree, and that is totally okay with me, because at the end of the day, I'm the mother of my child.
Anyway, I've also never really had to put my foot down with Nikolas until recently. He's always been a really good baby. He never really got into anything, which surprised even me because my mom has a bazillion baubles and such around the house. I never really had to do much as far as correcting his behavior.
I'm not sure where he picked it up from, but he started hitting. ALL THE TIME. At first I thought that maybe he was just testing the waters and seeing what my reaction would be. Then it became something that he would do anytime he wanted my attention, heck, he was doing it any time period. That's not even the worst. He thought it was hilarious!
I was stumped.
My mom suggested that I hit his hand hard when he hit me. I think that is insane. How would I be able to teach him not to do it when I'm doing it to him? I scoured blogs and Google to try to find a sensible solution.
Then it hit me, DUH, time-outs!
Which has really improved our problem. It's not perfect yet, but it is definitely a work in progress.
I read a few versions of how other parents do time-outs and this is what works best for us:

1. When he hits, or does anything he's not supposed to for that matter, I get down to his level, look him in the eyes and firmly warn him that if he does said thing again that he will get a time-out.
2. If he doesn't do it great! If he does, I put him in time-out, which happens to be in his "Pack N' Play" (he hated that thing even before time-outs) and I re-state why he is in time-out.
3. He usually protests and screams and throws a mini hulk tantrum but he calms down in under a minute. I know, I've timed it. Then I let him sit in there for another minute. So in all he's in there for about two minutes.
4. My favorite part, I take him out, give him a ton of kisses and hugs and re-state that he should not do whatever it is he did to land himself in time-out and that mommy loves him.

It's at the point now where all I have to do is give him a warning and he pretty much knows to cut it out. He only really pushes it when he's tired and cranky or he's just being a dare devil.
For now this is working really well for us and I hope it continues because if not I'll be back scouring my favorite mommy blogs for more advice.

How do you discipline your babes?